Gas price hike deferred due to state elections: Petroleum Minister

New Delhi: The cabinet decision to defer an increase in natural gas price till mid-November has been taken in view of next month's assembly elections in Maharashtra and Haryana, Petroleum Minister Dharmendra Pradhan said Thursday.

"It was done due to elections," Pradhan said referring to Wednesday's cabinet deliberations on the matter.

Assembly elections to Maharashtra and Haryana assemblies will be held on Oct 15 and counting will take place on Oct 19. Byelections in two parliamentary constituencies -- in Maharashtra's Beed and Odisha's Kandhamal -- will also be held on Oct 15.

The government in June had previously deferred a decision on revising domestic natural gas prices till Sep 30 for holding wider consultations.

IANS had reported Wednesday that with Finance Minister Arun Jaitley yet to be discharged from hospital on the day scheduled for holding cabinet meetings, it appeared unlikely the government would meet its month-end deadline for announcing the new price for domestic gas.

Prime Minister Narendra Modi left for the US Thursday.

Pradhan did not specify if the decision was postponed because of the poll model code of conduct being in place, or to avoid the eventual increase of power tariff and CNG rates consequent to a hike in gas price.

The four-member Committee of Secretaries (CoS) set up by the government to review the gas-pricing formula has submitted its report to the petroleum ministry.

The government last month constituted a committee comprising the secretaries of power, fertilizer and expenditure with Rajive Kumar, additional secretary in the petroleum ministry, as its member secretary.

The committee has held discussions with representatives of both gas producers and consumers on the issue.

The committee's brief is to examine the whole range of issues related to gas pricing, including the Rangarajan Committee formula, which was approved by the previous UPA government but could not be implemented as the Election Commission barred price announcement in the period leading up to general elections.

A new price based on the Rangarajan Committee formula would have most likely doubled the gas price to $8.4 per unit from April 1.

The Cabinet Committee on Economic Affairs on June 25 decided to defer implementation of the Rangarajan formula till Sep 30 and come up with a new regime by Oct 1.

The Mukesh Ambani-led Reliance Industries (RIL) and its partners, British oil giant BP and Niko Resources, have served an arbitration notice on the government on revising their gas price, which expired March 31.

The oil ministry, on the other hand, has imposed a penalty on the company for failing to meet output targets from RIL-led consortium's D-1 and D-3 fields in the KG-D6 eastern offshore block to the extent of 1.9 trillion cubic feet of gas.

There has been opposition to the Rangarajan formula from various quarters on account of its likely impact on electricity tariff, urea cost, CNG rates and piped cooking gas price.

Every dollar increase in gas rates will lead to a Rs.1,370 per tonne rise in urea production costs and a 45 paise per unit increase in electricity tariff. There would be a minimum Rs.2.81 per kg increase in CNG rates, and a Rs.1.89 per standard cubic metre hike in piped cooking gas cost.

Meanwhile, a committee led by former finance secretary Vijay Kelkar has recommended market-linked pricing for domestic natural gas.

A consultation paper sent to the petroleum ministry by the Kelkar Committee, formed by the previous UPA government last year to suggest a roadmap for cutting import dependency in the hydrocarbon sector by 2030, has suggested market determined pricing for natural gas to make new exploration and production activities viable.

The Parliamentary Standing Committees on Finance as well as Petroleum had called for a review of the formula suggested by the Rangarajan panel, saying gas price should have some linkage with the cost of production.

In their submission to the secretaries panel, energy producers have called for a natural gas pricing policy that is "legitimate, relevant and credible" to maintain investor interest in the Indian hydrocarbons exploration sector.

State-run explorer Oil and natural Gas Corp has said it needs $6-7.15 per unit to break even on gas it plans to produce from its KG basin block and a price of between $5.25-17.80 per unit to break even on production planned from seven small fields in the western offshore.